Innovation in Internet Payments

April 16, 2002


New York, NY, USA April 16, 2002

: The Plot Against Credit Cards

Celent Communications predicts ACH and closed-end networks-based payments will capture 7% market share of US e-commerce by 2005. Alternative payment solutions will thrive thanks to "niche markets," which will account for 25% of e-commerce by 2005. In a new report, : The Plot Against Credit Cards, Celent examines the competition between cards and emerging payment solutions in non-recurring Internet payments. Celent predicts non-card solutions will capture 7% market share by in 2005, up from 3% in 2001. While attempts to displace card instruments have failed miserably in recent years, Celent shows that alternative solutions began to make a significant impact on the Internet in 2001. "Paypal has reshaped the landscape," comments Gwenn B騷ard, the author of the report. "The strategy of new contenders consists in piggybacking on existing payment networks and creating proprietary networks to offer better terms and services to merchants at a lower cost than credit cards." While alternative payment systems originally targeted mainstream retailing, they have been unexpectedly successful in "niche markets" poorly addressed by cards and other instruments. For card associations, the good news is that new entrants have not耀o far葉argeted fixed-price purchases at top online retailers like Amazon. The bad news is that these "niche markets" 熔nline auctions, online gambling and adult content預re precisely where cards have weak positions. These markets will account for 25% of total e-commerce by 2005, and new entrants are likely to use them as springboards into typically card-dominated territories, e.g., big-ticket retail.

Organizations and payment initiatives reviewed or mentioned in the report include ACHEX, ACI Worldwide, ALACHA, Alltel, Amazon, Amazon Honor System, American Bankers Association, American Express, AOL, Bank of America, Bank of Montreal, Bank One, BB&T Corporation, BCE Emergis, Benz, Billpoint, Canadian Payments Association, Cashedge, Cecoban SA de CV, Certapay, Checkfree, Checkspace, CIBC, Citibank, Conedison, Corillian, C2it, Dell, eBay, eCash, eFunds, Fidelity Investments, First Data, Fleet Boston Financial, Fort Knox National Company, Gardiner Savings Institution, JP Morgan Chase, Electronic Payments Network (UPIC), Flooz, HSCBC, iBill, Intelidata Technologies Corp, Liberty Alliance, LML Payment Systems, Mastercard, Mastercard SPA, Metavante, Mid-America Payment Exchange, Microsoft .Net, Microsoft Passport, MoneyZap, NACHA, NASACT, Navy Federal Credit Union, Federal Reserve of Chicago, Federal Reserve of St. Louis, Network 1 Financial, Pay@Delivery US Postal Service, Paypal, Princeton eCom, Project ACTION, Promeritus, Qpass, Safewww, Inc, Scotiabank, Southwest Corporate Federal Credit Union, SunTrust Bank, SurePay, Symcor, The Vanguard Group, Telecheck, Toronto Dominion Bank, T.RowePrice, Visa, Verified By Visa, Verisign, Veristar Corporation, Wachovia Bank, Wells Fargo, Western Union.

A Table of Contents is available online.

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents


  New York, NY, USA April 16, 2002

Return to report Abstract


  Fixed-Price Purchases 6
  Revenues at Stake 8
  Debit Card Compliance and Credit Card Adoption Issues 10
  Raising Fraud 12
  High Merchant Fees 14
  The Surge of Niche Markets 15
  ACH and Closed-end Networks 19
  VISA: Verified by VISA 28
  Project Action (NACHA) 32
  PayPal 39
  Certapay 46




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